Eye on Lansing Snyder may call for lessening senior tax breaks Governor to release his 2011-12 budget today

By Kathy Barks Hoffman Associated Press LANSING, Mich. (AP) -- Every time a Michigan resident begins collecting a pension or turns 65, the nation's most generous tax breaks for seniors kick in. Now Gov. Rick Snyder may be on the brink of proposing that the tax breaks be scaled back when he releases his 2011-12 budget today. He has called for "shared sacrifice" but has not made many of his plans public so far. The special treatment for seniors drains about $1 billion a year from state coffers. Michigan is facing a shortfall of $1.8 billion in the budget year that starts Oct. 1, and the new Republican governor has said all exemptions must be examined to see if they should be kept as the state struggles to balance its budget. The Washington-based Center for Budget and Policy Priorities says Michigan's benefits are twice as generous as those of second-place Kentucky. A retired couple in Michigan can have more than $100,000 of income without having to pay any state income tax. Michigan State University studies say about 95 percent of seniors pay no state income tax, and may get extra money from the state through a property tax credit. Political pressure in the past has made it hard to reduce senior tax breaks to help the state's bottom line, even as Michigan steadily loses more to the tax breaks as the number of older taxpayers grows. The proportion of the national population ages 65 and older is projected to grow from 12.4 percent in 2000 to 19.7 percent by 2030, according to the center's study. That means more people will be qualifying for senior tax breaks when the demand for senior services will be going up. The Michigan League for Human Services, an advocacy group for the poor, suggested two years ago that Michigan's senior tax breaks should be dropped to Kentucky's level so the state could put more into the safety net for its hundreds of thousands of unemployed workers. Michigan State University economics professor Charles Ballard said doing that could bring in an extra $200 million a year, but nothing was ever introduced. Any suggestion by Snyder to reduce the tax breaks is sure to be met with dismay by seniors, who have outsized clout because they vote more regularly than young voters. No Michigan lawmaker has ever introduced bills that would freeze the cap on exempted private pension income or begin taxing the Social Security income of higher-income seniors, as the federal government does. Many of the extra credits were added decades ago, when senior poverty was a significant issue. But as seniors overall have grown more prosperous, their tax breaks haven't been phased out for those in higher income brackets. That's not true at the federal level, where a portion of middle- and upper-income citizens' Social Security began being taxed in the 1980s. The federal government also bans exemptions for pension income. Published: Thu, Feb 17, 2011